Alphabet Inc. 10-K MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Please read the following discussion and analysis of our financial condition and results of operations together with “Note about Forward-Looking Statements,” Part I, Item 1 "Business," Part I, Item 1A "Risk Factors," and our consolidated financial statements and related notes included under Item 8 of this Annual Report on Form 10-K. The following section generally discusses 2025 results compared to 2024 results. Discussion of 2024 results compared to 2023 results to the extent not included in this report can be found in Item 7 of our 2024 Annual Report on Form 10-K.

Understanding Alphabet’s Financial Results Alphabet is a collection of businesses — the largest of which is Google. We report Google in two segments, Google Services and Google Cloud, and all non-Google businesses collectively as Other Bets. Supporting these businesses, we have centralized certain AI-related research and development focused on advanced research in AI and developing the frontier models that serve our businesses, which is reported in Alphabet-level activities. For further details on our segments, see Part I, Item 1 Business and Note 15 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Trends in Our Business and Financial Effect The following long-term trends have contributed to the results of our consolidated operations, and we anticipate that they will continue to affect our future results: • As we continue to grow our business and meet the evolving behaviors and needs of our users and customers, our revenue growth and mix along with our cost and margin profiles are being influenced by a number of factors, including: Expanded AI Offerings in our Products and Services: The continuing evolution of the online world has contributed to the growth of our business. We expect that this evolution, including user engagement with AI products and services, will continue to benefit our business and our revenues. As we continue to incorporate AI into our products and services, such as with AI Overviews and AI Mode in Search, and with enterprise AI solutions on our Google Cloud Platform, we may monetize differently than our historical consumer and enterprise offerings which could affect revenue growth rates and margin trends. When developing new products and services we generally focus first on user experience and then on monetization. At the same time, we face increasing competition, including from other developers and providers of AI products and services, which may affect our revenues. Increasing Revenues Beyond Advertising: Revenues from cloud, consumer subscriptions, platforms, and devices, which may have differing characteristics than our advertising revenues, have grown over time. Certain of these revenues have been growing at a rate higher than our advertising revenues, becoming a larger percentage of our consolidated revenues, and we expect this trend to continue. The margins on these revenues vary significantly and are generally lower than the margins on our advertising revenues. Increased Investment in Technical Infrastructure: We continue to invest in capital expenditures as we scale our technical infrastructure, in particular for AI, to meet the demand of our users and enterprise customers and to support research internally. We invested heavily in capital expenditures in 2025 and in 2026, we expect to significantly increase , relative to 2025, our i nvestment in our technical infrastructure, including servers and network equipment, and data centers. The costs associated with operating our technical infrastructure - depreciation, energy, equipment, and network capacity - are expected to significantly increase as developing and serving AI offerings require more compute power than our historical consumer and enterprise offerings. While our technical infrastructure costs increase, we expect to continue to drive efficiencies in our data centers, for example, through the design of our AI models and our TPU and GPU-based technical infrastructure. Continued Investment in Intellectual Property through R&D and Acquisitions: We continue to make significant research and development investments in areas of strategic focus as we seek to develop new, innovative offerings, and improve our existing offerings across our businesse s. A cquisitions and strategic investments remain important elements in our use of capital and contribute to the breadth and depth of our offerings, expand our expertise in engineering and other functional areas, and build strong partnerships around strategic initiatives. Traffic Acquisition Costs Growth and Rate Changes: We expect traffic acquisition costs ("TAC") paid to our distribution partners and Google Network partners to increase as our advertising revenues grow. Our overall TAC as a percentage of our advertising revenues ("TAC rate") has been decreasing primarily due to a revenue mix 28.


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shift from Google Network properties to Google Search & other properties. Our TAC rate will continue to be affected by changes in device mix; geographic mix; partner agreement terms; partner mix; the percentage of queries channeled through paid access points; product mix; the relative revenue growth rates of advertising revenues from different channels; and revenue share terms. • We have raised capital through external financing in the form of debt and we may continue to seek debt or other forms of financing in the future to support our capital and operating needs. In 2025, we raised capital through the issuance of debt and we expect to continue to assess the use of debt and other forms of financing in the future. We expect to continue to enter into finance leases, primarily for data centers. Additionally, in 2025, we provided credit support, such as through backstops and guarantees, to certain infrastructure related counterparties and may continue to provide additional credit support in the future. • We face an evolving regulatory environment, and we are subject to claims, lawsuits, investigations, and other forms of potential legal liability, which could affect our business practices and financial results. Changes in social, political, economic, tax, and regulatory conditions or in laws and policies governing a wide range of topics and related legal matters, including investigations, lawsuits, and regulatory actions, have resulted in fines and caused us to change our business practices. As the regulatory environment continues to evolve, we may continue to incur fines and we expect increased costs associated with compliance, modifications to our products and services, and limitations on our ability to pursue certain business practices. For additional information, see Part I, Item 1A Risk Factors and Legal Matters in Note 10 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Revenues and Monetization Metrics We generate revenues by delivering relevant, cost-effective online advertising; cloud-based solutions that provide enterprise customers of all sizes with infrastructure, platform services, and applications; and sales of other products and services, such as fees received for subscription-based products, apps and in-app purchases, and devices. For additional information on how we recognize revenue, see Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. In addition to the long-term trends and their financial effect on our business discussed above, fluctuations in our revenues have been and may continue to be affected by a combination of factors, including: • changes in foreign currency exchange rates; • changes in pricing, such as those resulting from changes in fee structures, discounts, and customer incentives; • general economic conditions and various external dynamics, including geopolitical events, regulations, and other measures and their effect on advertiser, consumer, and enterprise spending; • new product, service, and market launches; and • seasonality. Additionally, fluctuations in our revenues generated from advertising ("Google advertising"), other sources ("Google subscriptions, platforms, and devices"), Google Cloud, and Other Bets have been, and may continue to be, affected by other factors unique to each set of revenues, as described below. Google Services Google Services revenues consist of Google advertising as well as Google subscriptions, platforms, and devices revenues. Google Advertising Google advertising revenues are comprised of the following: • Google Search & other, which includes revenues generated on Google search properties (including revenues from traffic generated by search distribution partners who use Google.com as their default search in browsers, toolbars, etc.), and other Google owned and operated properties like Gmail, Google Maps, and Google Play; • YouTube ads, which includes revenues generated on YouTube properties; and • Google Network, which includes revenues generated on Google Network properties participating in AdMob, AdSense, and Google Ad Manager. 29.


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We use certain metrics to track how well traffic across various properties is monetized as it relates to our advertising revenues: paid clicks and cost-per-click pertain to traffic on Google Search & other properties, while impressions and cost-per-impression pertain to traffic on our Google Network properties. Paid clicks represent engagement by users and include clicks on advertisements by end-users on Google search properties and other Google owned and operated properties including Gmail, Google Maps, and Google Play. Cost-per-click is defined as click-driven revenues divided by our total number of paid clicks and represents the average amount we charge advertisers for each engagement by users. Impressions include impressions displayed to users on Google Network properties participating primarily in AdMob, AdSense, and Google Ad Manager. Cost-per-impression is defined as impression-based and click-based revenues divided by our total number of impressions, and represents the average amount we charge advertisers for each impression displayed to users. As our business evolves, we periodically review, refine, and update our methodologies for monitoring, gathering, and counting the number of paid clicks and the number of impressions, and for identifying the revenues generated by the corresponding click and impression activity. Fluctuations in our advertising revenues, as well as the change in paid clicks and cost-per-click on Google Search & other properties and the change in impressions and cost-per-impression on Google Network properties and the correlation between these items have been, and may continue to be, affected by factors in addition to the general factors described above, such as: • advertiser competition for keywords; • changes in advertising quality, formats, delivery, or policy; • changes in device mix; • seasonal fluctuations in internet usage, advertising expenditures, and underlying business trends, such as traditional retail seasonality; and • traffic growth in emerging markets compared to more mature markets and across various verticals and channels. Google Subscriptions, Platforms, and Devices Google subscriptions, platforms, and devices revenues are comprised of the following: • consumer subscriptions, which primarily include revenues from YouTube services, such as YouTube TV, YouTube Music and Premium, and NFL Sunday Ticket, as well as Google One, which offers access to our most capable Gemini models; • platforms, which primarily include revenues from Google Play sales of apps and in-app purchases; • devices, which primarily include sales of the Pixel family of devices; and • other products and services. Fluctuations in our Google subscriptions, platforms, and devices revenues have been, and may continue to be, affected by factors in addition to the general factors described above, such as changes in customer usage and demand, number of subscribers, and the timing of product launches. Google Cloud Google Cloud revenues are comprised of the following: • Google Cloud Platform primarily generates consumption-based fees and subscriptions for infrastructure, platform, and other services. These services provide access to solutions such as AI offerings including our enterprise AI infrastructure, Vertex AI platform, and Gemini Enterprise; cybersecurity offerings; and data and analytics solutions; • Google Workspace includes subscriptions for cloud-based communication and collaboration tools for enterprises, such as Gmail, Docs, Calendar, Drive, and Meet, with integrated features like Gemini for Google Workspace; and • other enterprise services. Fluctuations in our Google Cloud revenues have been, and may continue to be, affected by factors in addition to the general factors described above, such as changes in customer usage, demand, and supply availability. 30.


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Other Bets Revenues from Other Bets are generated primarily from the sale of autonomous transportation services and internet services.

Costs and Expenses Our cost structure has two components: cost of revenues and operating expenses. Our operating expenses include costs related to research and development, sales and marketing, and general and administrative functions. Certain of our costs and expenses, including those associated with the operation of our technical infrastructure as well as components of our operating expenses, are generally less variable in nature and may not correlate to changes in revenue. Additionally, fluctuations in employee compensation expenses may not directly correlate with changes in headcount, due to factors such as annual SBC awards that vest over time. Cost of Revenues Cost of revenues is comprised of TAC and other costs of revenues. • TAC includes: ◦ amounts paid to our distribution partners who make available our search access points and other ad-supported services. Our distribution partners include browser providers, mobile carriers, original equipment manufacturers, and software developers; and ◦ amounts paid to Google Network partners primarily for ads displayed on their properties. • Other cost of revenues primarily includes: ◦ content acquisition costs, which are payments to content providers from whom we license video and other content for distribution, primarily related to YouTube (we pay fees to these content providers based on revenues generated, subscriber counts, or a flat fee); ◦ depreciation expense, primarily related to our technical infrastructure; ◦ employee compensation expenses related to our technical infrastructure and other operations such as content review and customer and product support; ◦ inventory and other costs related to the devices we sell; and ◦ other technical infrastructure operations costs, including energy, equipment, and network capacity costs. TAC as a percentage of revenues generated from ads placed on Google Network properties are significantly higher than TAC as a percentage of revenues generated from ads placed on Google Search & other properties, because most of the advertiser revenues from ads served on Google Network properties are paid as TAC to our Google Network partners. Operating Expenses Operating expenses are generally incurred during our normal course of business, which we categorize as either research and development, sales and marketing, or general and administrative. The main components of our research and development expenses are: • depreciation expense, primarily related to our technical infrastructure; • employee compensation expenses for engineering and technical employees responsible for research and development related to our existing and new products and services; • other technical infrastructure operations costs, including energy, equipment, and network capacity costs; and • third-party services fees primarily relating to consulting and outsourced services in support of our engineering and product development efforts. The main components of our sales and marketing expenses are: • employee compensation expenses for employees engaged in sales and marketing, sales support, and certain customer service functions; and • spend relating to our advertising and promotional activities in support of our products and services. The main components of our general and administrative expenses are: 31.


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• employee compensation expenses for employees in finance, human resources, information technology, legal, and other administrative support functions; • expenses relating to legal and other matters, including certain fines and settlements; and • third-party services fees, including audit, consulting, outside legal, and other outsourced administrative services.

Other Income (Expense), Net OI&E, net primarily consists of interest income (expense), the effect of foreign currency exchange gains (losses), net gains (losses) and impairment on our marketable and non-marketable securities and income (loss) and impairment from our equity method investments. For additional information, including how we account for our investments and factors that can drive fluctuations in the value of our investments, see Note 1 and Note 3 of the Notes to Consolidated Financial Statements included in Item 8 as well as Item 7A Quantitative and Qualitative Disclosures About Market Risk of this Annual Report on Form 10-K.

Provision for Income Taxes Provision for income taxes represents the estimated amount of federal, state, and foreign income taxes incurred in the US and the many jurisdictions in which we operate. The provision includes the effect of reserve provisions and changes to reserves that are considered appropriate as well as the related net interest and penalties. For additional information, including a reconciliation of the US federal statutory rate to our effective tax rate, see Note 14 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Executive Overview The following table summarizes consolidated financial results (in millions, except for per share information and percentages):

(1) For additional information on the calculation of diluted net income per share, see Note 12 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. • Revenues were $402.8 billion, an increase of 15% year over year, primarily driven by an increase in Google Services revenues of $37.8 billion, or 12%, and an increase in Google Cloud revenues of $15.5 billion, or 36%. • Cost of revenues was $162.5 billion, an increase of 11% ye ar over year, primarily driven by increases in TAC, content acquisition costs, and depreciation expense. • Operating ex penses were $111.3 billion, an increase of 22% ye ar over year, primarily driven by increases in employee compensation expenses, expenses related to legal and other matters, and depreciation expense. Other Information: 32.


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• In 2025, we entered into definitive agreements to acquire Wiz, a leading cloud security platform, for $32.0 billion, and Intersect, a provider of data center and energy infrastructure solutions, for $4.8 billion in cash plus the assumption of debt. Both acquisitions are expected to close in 2026, subject to customary closing conditions, including the receipt of regulatory approvals. • In 2025, we issued senior unsecured notes for net proceeds of $37.3 billion, to be used for general corporate purposes. • OI&E of $29.8 billion for the year ended December 31, 2025 included net gains on equity securities of $24.1 billion, primarily related to unrealized gains on our non-marketable equity securities. • Other Bets operating loss of $7.5 billion for the year ended December 31, 2025 included a $2.1 billion employee compensation charge recognized in the fourth quarter for Waymo, primarily reflected in research and development expenses, based on estimated stock valuation. In February 2026, Waymo announced an investment round of $16.0 billion, the significant majority of which was funded by Alphabet. • Changes to U.S. tax law enacted on July 4, 2025, allow, among other things, for immediate expensing of domestic research and experimentation costs and accelerated depreciation on eligible capital expenditures, the effects of which are included in operating cash flows for the year ended December 31, 2025. • Repurchases of Class A and Class C shares were $6.5 billion and $38.9 billion, respectively, totaling $45.4 billion for the year ended December 31, 2025. • Operating cash flow was $164.7 billion for the year ended December 31, 2025. • Capital expenditures, which primarily reflected investments in technical infrastructure, were $91.4 billion for the year ended December 31, 2025. • As of December 31, 2025, we had 190,820 employees. We are monitoring ongoing developments surrounding international trade and the macroeconomic environment. As a result of volatility in international trade and financial markets, we may experience direct and indirect effects on our business, operations, and financial results. Our past results may not be indicative of our future performance, and our financial results may differ materially from historical trends.

Google Services Google Advertising Google Search & other Google Search & other revenues increased $26.4 billion from 2024 to 2025. The overall growth was driven by interrelated factors including increases in search queries resulting from growth in user adoption and usage on mobile devices; growth in advertiser spending; and improvements we have made in ad formats and delivery. 33.


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YouTube ads YouTube ads revenues increased $4.2 billion from 2024 to 2025. The growth was driven by our direct response advertising products followed by our brand advertising products, both of which benefited from increased spending by our advertisers. Google Network Google Network revenues decreased $567 million from 2024 to 2025, primarily due to a decrease in AdSense revenues, partially offset by an increase in AdMob revenues. Monetization Metrics The following table presents changes in monetization metrics for Google Search & other revenues (paid clicks and cost-per-click) and Google Network revenues (impressions and cost-per-impression), expressed as a percentage, from 2024 to 2025:


Google Search & other	Google Search & other	Google Search & other
Paid clicks change	Paid clicks change	Paid clicks change	6	6	%
Cost-per-click change	Cost-per-click change	Cost-per-click change	7	7	%
Google Network	Google Network	Google Network
Impressions change	Impressions change	Impressions change	(7)	(7)	%
Cost-per-impression change	Cost-per-impression change	Cost-per-impression change	7	7	%

Changes in paid clicks and impressions are driven by a number of interrelated factors, including changes in advertiser spending; ongoing product and policy changes; and, as it relates to paid clicks, fluctuations in search queries resulting from changes in user adoption and usage, primarily on mobile devices. Changes in cost-per-click and cost-per-impression are driven by a number of interrelated factors including changes in device mix, geographic mix, advertiser spending, ongoing product and policy changes, product mix, property mix, and changes in foreign currency exchange rates. Google Subscriptions, Platforms, and Devices Google subscriptions, platforms, and devices revenues increased $7.7 billion from 2024 to 2025. The growth was primarily driven by an increase in subscriptions revenues. This increase was primarily due to the contribution from growth in paid subscriptions across both YouTube services and Google One. Google Cloud Google Cloud revenues increased $15.5 billion from 2024 to 2025, primarily driven by growth in Google Cloud Platform largely from infrastructure and platform services.

Revenues by Geography The following table presents revenues by geography as a percentage of revenues, determined based on the addresses of our customers:

(1) Regions represent Europe, the Middle East, and Africa (EMEA); Asia-Pacific (APAC); and Canada and Latin America ("Other Americas"). For additional information, see Note 2 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.


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Cost of Revenues The following table presents cost of revenues, including TAC (in millions, except percentages):

Cost of revenues increased $16.2 billion from 2024 to 2025 due to an increase in other cost of revenues and TAC of $11.2 billion and $5.0 billion, respectively. The increase in TAC from 2024 to 2025 was largely due to an increase in TAC paid to distribution partners, primarily driven by growth in revenues subject to TAC. The TAC rate decreased from 20.7% to 20.3% from 2024 to 2025, primarily due to a revenue mix shift from Google Network properties to Google Search & other properties. The TAC rates on Google Search & other and Google Network revenues were substantially consistent from 2024 to 2025. The increase in other cost of revenues from 2024 to 2025 was primarily due to increases in content acquisition costs, largely for YouTube, depreciation expense, and other technical infrastructure operations costs.

Research and Development The following table presents research and development expenses (in millions, except percentages):

Research and development expenses increased $11.8 billion from 2024 to 2025, primarily driven by increases in employee compensation expenses of $6.9 billion and depreciation expense of $2.4 billion. The increase in employee compensation expenses was primarily driven by an increase in SBC expenses of $4.2 billion, which included an increase in a valuation-based compensation charge related to Waymo.

Sales and Marketing The following table presents sales and marketing expenses (in millions, except percentages):

Sales and marketing expenses increased $885 million from 2024 to 2025, primarily driven by an increase in advertising and promotional activities of $1.2 billion, partially offset by a decrease in employee compensation expenses of $214 million.

General and Administrative The following table presents general and administrative expenses (in millions, except percentages):

General and administrative expenses increased $7.3 billion from 2024 to 2025, primarily driven by an increase in expenses related to legal and other matters of $6.2 billion, largely the result of the $3.5 billion EC fine accrued in the third quarter of 2025 and a $1.4 billion legal accrual made in the second quarter of 2025. 35.


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Segment Profitability We report our segment results as Google Services, Google Cloud, and Other Bets. Additionally, certain costs are not allocated to our segments because they represent Alphabet-level activities. For further details on our segments, see Part I, Item 1 Business and Note 15 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. The following table presents segment operating income (loss) (in millions).

(1) Alphabet-level activities primarily reflect expenses related to our shared AI research and development. Google Services Google Services operating income increased $18.1 billion from 2024 to 2025. The increase in operating income was primarily driven by an increase in revenues, partially offset by an increase in expenses related to legal and other matters, TAC, and content acquisition costs. Google Cloud Google Cloud operating income increased $7.8 billion from 2024 to 2025. The increase in operating income was primarily driven by an increase in revenues, partially offset by increases in usage costs for technical infrastructure and employee compensation expenses. Other Bets Other Bets operating loss increased $3.1 billion from 2024 to 2025. The increase in operating loss was primarily driven by an increase in employee compensation expenses largely due to an increase in a valuation-based compensation charge related to Waymo.

OI&E, net increased $22.4 billion from 2024 to 2025, primarily due to increases in net unrealized gains on equity securities resulting from fair value adjustments on non-marketable equity securities. For additional information, see Note 3 and Note 7 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. 36.


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Provision for Income Taxes The following table presents provision for income taxes (in millions, except effective tax rate):

The effective tax rate increased from 2024 to 2025. This increase was primarily due to a decrease in the US Federal Foreign Derived Intangible Income tax deduction, a non-deductible EC fine and legal settlement in the US, partially offset by changes in prior period tax positions. Changes to US tax law enacted on July 4, 2025, allow for immediate expensing of domestic research and experimentation costs, accelerated depreciation on eligible capital expenditures, and other tax law changes impacting 2025 with certain changes effective in 2026. These changes are reflected in our results for the year ended December 31, 2025 . The OECD is coordinating negotiations among more than 140 countries with the goal of achieving consensus around substantial changes to international tax policies, including the implementation of a minimum global effective tax rate of 15%. Some countries have already implemented the legislation effective January 1, 2024. This did not have a material effect on our income tax provision for the 2025 fiscal year. In January 2026, the OECD introduced new guidance including a "Side-by-Side Safe Harbor" which, if elected, exempts U.S. domestic operations from being taxed by global minimum tax rules. However, it does not exempt foreign subsidiaries from local minimum tax requirements if implemented. As more countries enact these global minimum tax rules, our effective tax rate and cash tax payments could increase.

Cash, Cash Equivalents, and Marketable Securities As of December 31, 2025 , we had $126.8 billion in cash, cash equivalents, and short-term marketable securities. Ca sh equivalents and marketable securities a re comprised of time deposits, money market funds, highly liquid government bonds, corporate debt securities, mortgage-backed and asset-backed securities, and marketable equity securities.

Sources, Uses of Cash and Related Trends Our principal sources of liquidity are cash, cash equivalents, and marketable securities, as well as the cash flow that we generate from operations. The primary use of capital continues to be to invest for the long-term growth of the business. We regularly evaluate our cash and capital structure, including the size, pace, and form of capital return to stockholders. The following table presents cash flows (in millions):

Cash Provided by Operating Activities Our largest source of cash provided by operations are advertising revenues generated by Google Search & other properties, YouTube properties, and Google Network properties. In Google Services, we also generate cash through consumer subscriptions, the sale of apps and in-app purchases, and devices. In Google Cloud, we generate cash through consumption-based fees and subscriptions for infrastructure, platform, applications, and other cloud services. Our primary uses of cash from operating activities include payments to distribution and Google Network partners, to employees for compensation, and to content providers. Other uses of cash from operating activities include payments to suppliers for devices, to tax authorities for income taxes, and other general corporate expenditures. 37.


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Net cash provided by operating activities increased from 2024 to 2025 due to an increase in cash received from customers, partially offset by an increase in cash payments for cost of revenues and operating expenses.

Cash Used in Investing Activities Cash provided by investing activities consists primarily of maturities and sales of investments in marketable and non-marketable securities. Cash used in investing activities consists primarily of purchases of marketable and non-marketable securities, purchases of property and equipment, and payments for acquisitions. Net cash used in investing activities increased from 2024 to 2025, primarily due to an increase in purchases of property and equipment, driven by investments in technical infrastructure, and a decrease in maturities and sales of marketable securities.

Cash Used in Financing Activities Cash provided by financing activities consists primarily of proceeds from issuance of debt and proceeds from the sale of interests in consolidated entities. Cash used in financing activities consists primarily of repurchases of stock, repayments of debt, net payments related to stock-based award activities, and dividend payments. Net cash used in financing activities decreased from 2024 to 2025 due to an increase in proceeds from issuance of debt and a decrease in repurchases of stock, partially offset by repayments of debt.

Liquidity and Material Cash Requirements We expect exist ing cash, cash equivalents, short-term marketable securities, and cash flows from operations and financing activities to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities for at least the next 12 months, and thereafter for the foreseeable future.

Capital Expenditures and Leases We make investments in land, buildings, and servers and network equipment through purchases of property and equipment and lease arrangements to provide capacity for the growth of our services and products.

Capital Expenditures Our capital investments in property and equipment consist primarily of the following major categories: • technical infrastructure, which consists of our investments in servers and network equipment, data center land, and building construction and improvements; and • office facilities, ground-up development projects, and building improvements. Assets not yet in service are those that are not ready for their intended use, including assets in the process of construction or assembly, and consist primarily of technical infrastructure. The time frame from date of purchase to placement in service of these assets may extend from months to years. For example, our data center construction projects are generally multi-year projects with multiple phases, where we acquire land and buildings, construct buildings, and secure and install servers and network equipment. During the years ended December 31, 2024 and 2025, we spent $52.5 billion and $91.4 billion on capital expenditures, respectively. In 2026, we expect to significantly increase , relative to 2025, our i nvestment in our technical infrastructure, including servers and network equipment, and data centers. Depreciation of our property and equipment commences when such assets are ready for their intended use. For the years ended December 31, 2024 and 2025, our depreciation on property and equipment was $15.3 billion and $21.1 billion, respectively.

Leases As of December 31, 2025, the amount of total undiscounted future lease payments under operating leases was $18.3 billion, of which $3.3 billion is short-term, and total undiscounted future lease payments under finance leases was $2.9 billion, of which $491 million is short-term. As of December 31, 2025, we have entered into leases primarily related to data centers that have not yet commenced with short-term and long-term future lease payments of $5.8 billion and $52.7 billion, respectively. These leases will commence between 2026 and 2031 with non-cancelable lease terms primarily between one and 25 years. In January 2026, we executed a power purchase agreement which we expect to be accounted for as a lease resulting in future payments depending on certain agreement terms of $9.9 billion between 2027 and 2047. If certain contractual conditions for the project are not met, we would instead make a one-time payment of approximately $3.5 billion and assume ownership of the power generating assets. 38.


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For additional information on leases, see Note 4 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Financing As of December 31, 2025, we had senior unsecured notes outstanding with a total carrying value of $48.5 billion, of which $2.0 billion was short-term. The associated short-term and long-term future interest payments were $1.8 billion and $35.7 billion, respectively. During 2025, we issued $22.5 billion of US dollar-denominated senior unsecured notes and €13.25 billion of euro-denominated senior unsecured notes for general corporate purposes, comprised of the following: • May 2025 : We issued $5.0 billion of US dollar-denominated fixed-rate senior unsecured notes with a weighted-average coupon rate of 4.89%, and a weighted-average maturity of approximately 24 years. We also issued €6.75 billion of euro-denominated fixed-rate senior unsecured notes with a weighted-average coupon rate of 3.31%, and a weighted-average maturity of approximately 14 years. • November 2025 : We issued $500 million of US dollar-denominated floating-rate senior unsecured notes and $17.0 billion of US dollar-denominated fixed-rate senior unsecured notes with a weighted-average coupon rate of 4.92% and a weighted-average maturity of approximately 20 years. We also issued €6.5 billion of euro-denominated fixed-rate senior unsecured notes with a weighted-average coupon rate of 3.44% and a weighted-average maturity of approximately 16 years. As of December 31, 2025, we had $10.0 billion of revolving credit facilities, $4.0 billion expiring in April 2026 and $6.0 billion expiring in April 2030 . No amounts have been borrowed under the credit facilities. We also have a commercial paper program of up to $25.0 billion, which is used for general corporate purposes. As of December 31, 2025, we had no commercial paper outstanding. For additional information, see Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. We use contract manufacturers for our technical infrastructure and device assembly and may supply them with components purchased directly from suppliers. Certain of these arrangements result in a portion of the cash received from and paid to contract manufacturers to be presented as financing activities on the Consolidated Statements of Cash Flows included in Item 8 of this Annual Report on Form 10-K.

Share Repurchase Program During 2025, we repurchased and subsequently retired 240 million shares for $45.4 billion. In April 2024, the company's Board of Directors authorized a $70.0 billion share repurchase program for its Class A and Class C shares. In April 2025, the company's Board of Directors authorized an additional $70.0 billion share repurchase program for its Class A and Class C shares. As of December 31, 2025, $69.5 billion remained available for Class A and Class C share repurchases. For additional information, see Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Dividend Program During the year ended December 31, 2025, total cash dividends were $4.8 billion for Class A, $703 million for Class B, and $4.5 billion for Class C shares, respectively. In April 2025, the company's Board of Directors increased the quarterly cash dividend by 5% to $0.21 per share of outstanding Class A, Class B, and Class C shares. The company has declared a quarterly cash dividend in the current quarter, and intends to pay quarterly cash dividends in the future, subject to review and approval by the company’s Board of Directors in its sole discretion.

Accrued Legal and Regulatory As of December 31, 2025, we had short-term accrued legal and regulatory fines and settlements of $15.6 billion. This amount primarily included EC fines, in addition to accruals related to other legal matters and regulatory fines and settlements. For additional information, see Note 10 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. 39.


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Taxes As of December 31, 2025 , we had long-term income taxes payable of $9.5 billion primarily related to unrecognized tax benefits. The timing and amount of any payment related to these unrecognized tax benefits are uncertain and cannot be estimated.

Purchase Commitments and Other Contractual Obligations We have material purchase commitments and other contractual obligations primarily related to energy take-or-pay contracts, licenses (including content licenses), and technical infrastructure and inventory orders. As of December 31, 2025, the total for these commitments was $149.1 billion, of which $113.0 billion was short-term, mostly related to technical infrastructure and inventory orders . These amounts reflect commitments and obligations through open purchase orders as well as the non-cancelable portion or the minimum cancellation fee in certain agreements. For those agreements with variable terms, we do not estimate the non-cancelable obligation beyond any minimum quantities and/or pricing as of December 31, 2025. In certain instances, the amount of our contractual obligations may change based on the expected timing of order fulfillment from our suppliers. For additional information related to our content licenses, see Note 10 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. As of December 31, 2025, we provided backstops in the form of financial guarantees and credit derivatives with maximum potential amount of future payments of $5.7 billion and $16.9 billion, respectively. For additional information on credit derivatives and financial guarantees, see Note 3 and Note 10 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. In addition, we regularly enter into multi-year, non-cancellable power purchase agreements with third-party suppliers that do not include a minimum dollar commitment. The amounts to be paid under these agreements are based on the actual volumes to be generated and are not readily determinable. We may experience increases in the costs associated with our purchase commitments and other contractual obligations as a result of ongoing developments surrounding international trade. For details on risks related to our manufacturing and supply chain and other risks, refer to Part 1, Item 1A, "Risk Factors" of this Annual Report on Form 10-K.

Pending Acquisitions In March 2025, we entered into a definitive agreement to acquire Wiz, Inc. ("Wiz"), a leading cloud security platform, for $32.0 billion, subject to closing adjustments, in an all-cash transaction. The acquisition of Wiz is expected to close in 2026, subject to customary closing conditions, including the receipt of regulatory approvals. In December 2025, we entered into a definitive agreement to acquire Intersect, which provides data center and energy infrastructure solutions, for $4.8 billion in cash, plus the assumption of debt. The acquisition of Intersect is expected to close in the first half of 2026, subject to customary closing conditions. For additional information, see Note 8 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Critical Accounting Estimates We prepare our consolidated financial statements in accordance with GAAP. In doing so, we have to make estimates and assumptions. Our critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in them have had or are reasonably likely to have a material effect on our financial condition or results of operations. Accordingly, actual results could differ materially from our estimates. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We have reviewed our critical accounting estimates with the Audit Committee of our Board of Directors. For a summary of significant accounting policies and the effect on our financial statements, see Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. Fair Value Measurements of Non-Marketable Equity Securities We measure certain financial instruments at fair value on a nonrecurring basis, consisting primarily of our non-marketable equity securities. These investments are accounted for under the measurement alternative method ("the measurement alternative") and are measured at cost, less impairment, subject to upward and downward adjustments resulting from observable price changes for identical or similar investments of the same issuer. These adjustments require quantitative assessments of the fair value of our securities, which may require the use of unobservable inputs. 40.


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Adjustments are determined primarily based on a market approach as of the transaction date and involve the use of estimates using the best information available, which may include cash flow projections or other available market data. Non-marketable equity securities are also evaluated for impairment, based on qualitative factors including the companies' financial and liquidity position and access to capital resources, among others. When indicators of impairment exist, we prepare quantitative measurements of the fair value of our equity investments using a market approach or an income approach, which requires judgment and the use of unobservable inputs, including discount rates, investee revenues and costs, and comparable market data of private and public companies, among others. When the quantitative remeasurements of fair value indicate an impairment exists, we write down the investment to its current fair value. Property and Equipment We assess the reasonableness of the useful lives of our property and equipment periodically or when events indicate a change is necessary. To determine the useful lives of our technical infrastructure, we rely on multiple inputs, including historical asset performance, expected technology advancements, and our future infrastructure deployment plans. Any change in the estimated useful lives is recognized on a prospective basis. Income Taxes We are subject to income taxes in the US and foreign jurisdictions. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Recording an uncertain tax position involves various qualitative considerations, including evaluation of comparable and resolved tax exposures, applicability of tax laws, and likelihood of settlement. We evaluate uncertain tax positions periodically, considering changes in facts and circumstances, such as new regulations or recent judicial opinions, as well as the status of audit activities by taxing authorities. Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes and the effective tax rate in the period in which such determination is made. The provision for income taxes includes the effect of reserve provisions and changes to reserves as well as the related net interest and penalties. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service (IRS) and other tax authorities which may assert assessments against us. We regularly assess the likelihood of adverse outcomes resulting from these examinations and assessments to determine the adequacy of our provision for income taxes. Loss Contingencies We are subject to claims, lawsuits, regulatory and government inquiries and investigations, other proceedings, and consent orders involving competition, intellectual property, data privacy and security, tax and related compliance, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our platforms, personal injury, consumer protection, and other matters. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages. We record a liability when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the possible loss in Note 10 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. We evaluate, on a regular basis, developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related reasonably possible losses disclosed, and make adjustments as necessary. Significant judgment is required to determine both the likelihood and the estimated amount of a loss related to such matters. Until the final resolution of such matters, there may be an exposure to loss in excess of the amount recorded, and such amounts could be material.